Final answer:
When implementing lifecycle costing, a firm should do all of the above: benchmark, consider all costs, and calculate supplier costs. This approach requires a detailed understanding and analysis of costs in relation to production, leading to informed decisions on the profitability of the product over its lifecycle. Therefore the correct answer is d. All of the above
Step-by-step explanation:
When implementing lifecycle costing, a firm should consider a comprehensive approach which includes, but is not limited to, benchmarking, considering all costs associated with the product's lifecycle, and calculating both supplier costs and their own costs to get a true picture of expenditure over the product's lifetime. This includes understanding the relationship between production and costs, recognizing that every factor of production comes with an associated cost, analyzing short-run costs in more detailed terms, and evaluating cost patterns to ascertain potential profit.
To begin with, a firm should determine its cost structure, breaking down total costs into fixed and variable costs to calculate total cost, average variable cost, average total cost, and marginal cost. Armed with this information, the firm can proceed to calculate average profit and carry out a lifecycle costing approach that encompasses benchmarking, total cost consideration, and supplier cost evaluation.
It is crucial to analyze short-run costs in relation to total, fixed, variable, marginal, and average costs to recognize the diverse implications each category has for the firm's financial well-being. Additionally, the ability to calculate average profit and evaluate patterns of costs fosters improved decision-making to harness potential profit over the item's lifecycle.